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China Study Warns Of Impending Oil Production Peak & World Oil Market Squeeze, + Peak Recoverable Coal ~2020

Alternative Energy

China is rapidly approaching peak fossil fuel extraction according to a new state-funded study led by the China University of Petroleum in Beijing.

The study findings include the assertion that China will experience a peak in its total oil production (conventional + unconventional) by as early as 2018. As a result, world oil markets and geopolitics are likely to be greatly affected as China seeks to meet the widening demand shortfall through trade.

Accompanying this reality, China will also be reaching peak commercially recoverable coal around 2020, according to the study. The study notes, though, that even though coal currently accounts for around 66% of China’s total energy consumption, a shift away from the resource has been underway in recent years, and that if this shift is accelerated, then demand may fall fast enough that peak coal may not occur there. For more on that, see:

China Halts Construction On 150 Gigawatts Of New Coal Power Plants

China’s Coal Consumption Declines Despite Increasing Energy Consumption

China Suspends 104 Under-Construction & Planned Coal Power Projects

With regard to natural gas, the study notes that, while China’s technically recoverable reserves are fairly high (peak by ~2040), water supply constraints are likely to limit extraction rates to a significant extent. The country’s shale oil and gas areas are already “highly exposed” to water stress issues, which are expected to increase over the coming decades.

Nafeez Ahmed published a really excellent article discussing the new study over at Insurge Intelligence that I recommend reading in its entirety if you have the time. For those who don’t have the time, though, I’m going to highlight some interesting parts here.

I’ll start by noting that the researchers warn that if “new abundant energy resources” aren’t lined up, the situation will “challenge the sustainable development of Chinese society.”

As noted in the piece by Ahmed: “There are various scenarios that follow from here — China could: shift to reducing its massive demand for energy, a tall order in itself given population growth projections and rising consumption; accelerate a renewable energy transition; or militarise the South China Sea for more deepwater oil and gas.

“Right now, China appears to be incoherently pursuing all three strategies, with varying rates of success. But one thing is clear — China’s decisions on how it addresses its coming post-peak future will impact regional and global political and energy security for the foreseeable future.”

With regard to renewables, the study authors argue that the country’s current goal of 20% renewables by 2030 isn’t sufficient if the fossil fuel supply gap is to be bridged (based on projected demand). They also argue that plans to transition entirely to electric vehicles will have to be sped up.

Very interestingly, though, the study authors also discuss the option of exploring “much less energy-intensive means” of supporting the country’s population, and transitioning away from current, high consumption rates of many resources.

While renewables no doubt have a place in China’s transition away from fossil fuels, the reality is that if overall energy demand and resource consumption was to be reduced, such a transition would be far easier. How does a country wean itself off of the modern consumer lifestyle, though?

On that note, these parts from Ahmed’s piece are very interesting: “I asked Professor Wang whether this indicated that Chinese policymakers were beginning to take seriously the risk of peak oil. ‘Many experts, including those from the government, have already known about our papers and the peak oil issues,’ said Wang, explaining that their research group were the first to have introduced the concept of peak oil to China. ‘The Chinese government has taken measures for years to deal with the problem that China’s domestic oil and gas production can’t meet its demand’.”]

“But he added that while some official agencies supported the basic research, senior Chinese policymakers did not necessarily understand the problem. Although a significant number of Chinese energy experts agree that ‘peak oil in China is real and may come soon, they don’t think peak oil in the world is real,’ said Wang: ‘Therefore, if China can import enough oil with reasonable cost, the impacts on the economy is not considered the key issue by the government. What they care about is the import cost, the world oil price. If the price is too high, this will affect the Chinese economy significantly.’

“… All these risks would be compounded if global oil markets experience a supply squeeze of some kind. According to Wang, a peak in total global oil production is likely to arrive sooner rather than later: ‘Our group thinks the global oil peak may arrive much early than most people think. So if it happens, the import quantities and import cost will be the big issues that China must consider’.

“Last year, INSURGE exclusively published in full a confidential HSBC report concluding that 81% of the world’s total liquids production is in decline, and that this could lead to an oil supply squeeze in 2018.

“That view has been partly corroborated by Ed Morse, head of global commodities at Citigroup, who recently said that OPEC producers are for the most part already at maximum capacity, largely due to a lack of investment in exploration and development. The HSBC report, however, went further than this, concluding that while economic factors are a major issue, most OPEC producers are now facing geophysical constraints which they are unlikely to be able to surpass.”

Some of the most interesting parts of the new study relate to an Energy Return on Investment (EROI) assessment of China’s fossil fuel industries. The results aren’t pretty. As on the global level, the EROI rates for China’s oil, coal, and natural gas extraction have been falling fairly rapidly in recent years.

In China, this declining trend has been mainly due to “the depletion of shallow-buried coal resources and to the move away from conventional oil and gas resources,” according to the study.

The EROI of China’s coal extraction industry is now expected to fall to under 25 over the next few years — which is pretty low, and down from an average of 35 during the 1990s.

Similarly, China’s “oil and gas had reached a high of around 14 in the late 1990s, declining to 9.9 by 2012. It too is predicted to plateau slowly downwards in coming decades,” as summarized by Ahmed.

Notably, the EROI for China’s largest oil field — the Daqing oil field — was just 6.4 in 2012, and is presumably even lower now.

So, what will China’s solution to these looming energy shortage problems be? Will the country accelerate its transition to renewable energy? Will it ramp up its efforts to control the resource-rich South China Sea?

Ahmed notes: “This could see China adopt a much more aggressive approach to untapped oil and gas resources in the South China Sea, where Vietnam, Indonesia, Malasyia and the Philippines, alongside China, have contested claims to different offshore oil and gas fields.

“Meanwhile, ExxonMobil, whose former CEO Rex Tillerson is now Secretary of State under President Donald Trump, has systematically forged oil deals with all these countries. This implicates the firm — and potentially the US government — in a strategy of encroachment to access South China Sea’s fossil fuel resources.”

Which sets China and the US up for potential conflicts in the region.

Personally, I would guess that China is likely to continue pursuing a strategy of “all of the above” — doubling down on renewables and vehicle electrification, while also looking to secure access to the remaining resources of East Asia.

The new study was published in the September 19th edition of Springer’s peer-reviewed Petroleum Science journal. Financial support was provided by all three of China’s major oil firms: the China National Petroleum Corporation (CNPC), China Petroleum Corporation (Sinopec), and China National Offshore Oil Corporation (CNOOC).

Clean Technica



16 Comments on "China Study Warns Of Impending Oil Production Peak & World Oil Market Squeeze, + Peak Recoverable Coal ~2020"

  1. MASTERMIND on Sun, 8th Oct 2017 12:52 pm 

    My favorite part is where the lead author said that energy experts understood and believed peak oil was real. But many senior government officials didn’t understand it and didn’t believe it could happen. LOL Peak Oil denial is insane.

  2. Cloggie on Sun, 8th Oct 2017 1:16 pm 

    Russia is becoming even more powerful and can exert pressure on Europa. “You still want our oil?”

  3. Davy on Mon, 9th Oct 2017 6:25 am 

    One thing they did not talk about is peak debt and peak bad debt. China is at both so it is also at peak economy. It will then become a game of managing decline. With China’s decline comes the world decline because China is the only engine of growth in the world and recently the primary engine of credit creations. All this plus the fact they are soon at peak oil/coal points to demand destruction. How fast renewables and nuclear come on to fill the gap is a wild card. How fast can China get with an EV transport penetration? This EV penetration will have to be with significant renewable integration or it is just bumping up to peak coal issues.

    Personally I think China is the best place to test demand management strategies. They made a one child policy work why not demand management. Yet, remember demand management is the beginning of the end for the status quo of globalism with heady frothy growth. Demand management is an acknowledgment of limits and decline. Economically it will be deflationary and with our global debt problem that could mean a cascade of bankruptcies.

    We are near a paradigm shift of an age. We are at the end of a late term civilization and likely near the end of the beginning of the short lived Anthropocene. Climate may go into abrupt change and modernism into a post modernism of decline and decay. How fast all this happens matters for most here. If it happens over decades then we may be able to adjust without catastrophic results. That is a big maybe and what is clear is a transition at these levels that is too quick and strong will be more than an unstable world in overshoot can manage.

    It may be the case crisis initiates change and demand management and population control are the only real policy that will matter. The problem with this important force of change is the techno optimist and their cornucopian green and brown world view is anathema to it. Whether you are a fake green or a denialist status quo fossil fuel type (brown) it is the same because anything that points to decline and decay is rejected. This rejection is understandable because both realize the absolute importance of growth and economic activity to make their dreams possible. Think of all the stuff fake greens need to produce to make their fantasy green world possible. The world of green or brown is about “MOAR” not “less” and “no”. “Less” and “no” do not mix with a growth based globalism but “less” and “no” is what is needed with demand management and population control so hence the catch 22 of modernism which is a trap of no escape.

    This is true with science, academia, and economics. These institutions are in denial. We have science denial at the very top. This denial is deceptive and centers on the solutions and the narratives of a fantasy future not the basics or the mechanics. Then there is the status quo of the conservative based science denialist and the skydaddy science denialist. As you see denial is repent everywhere. How many times have you heard about Mars trips and Hyperloop nonsense? How many times have you heard skydaddy hopium talk that population growth is the skydaddy’s will? This denial also centers on the common denominator of an economy that will continue to grow and never go into a depression again. This is important because we are likely at this moment financially broke in an environment of extend and pretend. This denial is about unachievable technical breakthroughs. These institutions that are considered our highest achievements are reinforcing the business world who also believes these good times will chug on. Central banks continue the debt Ponzi in an underlying support of all this.

    China is the end to all this because all this has happened because of what China has done along with the help and collusion of the West. If China would not have happened then this would all be past tense. We never would have gotten out of the 08 financial crisis without China. Without China we would currently be in a depression or maybe already collapsed. The worst of extend and pretend is in China. The biggest economic games are in China. Europe and the US are no longer the engine of globalism. They are important component but China is the engine and when China stalls everywhere will. The end of the status quo is near when China’s real and fantasy growth ends.

  4. Davy on Mon, 9th Oct 2017 6:46 am 

    And people believe this shit. What is worse scientist, academics, and wealthy business people believe this. No wonder we are near the end.

    “Terraforming 101: How To Make Mars A Habitable Planet”
    http://tinyurl.com/yc854yqn

    “Before we can journey to the stars, we must first go to Mars. That’s Elon Musk’s philosophy, anyways – and as Visual Capitalist’s Jeff Desjardins reports, just days ago he revealed new details on his ambitions to colonize the Red Planet, including sending two cargo rockets by 2022 and four rockets (two manned, two cargo) by 2024. In 40 to 100 years, Musk suggested that up to a million people could live there.”

  5. Sorry Not Sorry lyrics on Tue, 10th Oct 2017 3:59 am 

    We are near a paradigm shift of an age. We are at the end of a late term civilization and likely near the end of the beginning of the short lived Anthropocene. Climate may go into abrupt change and modernism into a post modernism of decline and decay. How fast all this happens matters for most here. If it happens over decades then we may be able to adjust without catastrophic results. That is a big maybe and what is clear is a transition at these levels that is too quick and strong will be more than an unstable world in overshoot can manage.

  6. makati1 on Tue, 10th Oct 2017 4:08 am 

    SNS, Your observation is right on. I suspect that we do not have decades, maybe not even many years, to adjust. I may live to see the end of humanity, or at least the world as we know and need it. I am 73.

  7. Davy on Tue, 10th Oct 2017 6:04 am 

    “SNS, Your observation is right on.”

    LOL, mad cat, she is directly referencing one of my comments. Thanks for agreeing with me.

    Thanks, SNS, for agreeing with me.

  8. makati1 on Tue, 10th Oct 2017 6:26 am 

    Even a blind pig eventually finds an acorn.

  9. Davy on Tue, 10th Oct 2017 6:36 am 

    So are you saying you are a blind pig?

  10. makati1 on Tue, 10th Oct 2017 6:50 am 

    No, I am saying YOU are. I knew you would twist my comment. I don’t live in a fantasy world lie you do. I live in the real one and am enjoying it immensely. LMAO

  11. Davy on Tue, 10th Oct 2017 6:54 am 

    Mad cat, I don’t need to twist your comments you do that on your own.

  12. makati1 on Tue, 10th Oct 2017 7:07 am 

    No Davy, your perception of what I say is warped so that is all you see. Too bad. Your delusions are getting worse.

  13. Davy on Tue, 10th Oct 2017 7:41 am 

    “No Davy, your perception of what I say is warped so that is all you see. Too bad. Your delusions are getting worse.”

    Examples?

  14. Davy on Tue, 10th Oct 2017 7:50 am 

    This is why I am American critical. BTW, it is also happening everywhere many here don’t admit to that.

    “Our Protected, Predatory Oligarchy: Dirty Secrets, Dirty Lies”
    http://tinyurl.com/yazjyxvx

    “If you want to understand why the status quo is unraveling, start by examining the feudal structure of our society, politics and economy. The revelations coming to light about Hollywood Oligarch Harvey Weinstein perfectly capture the true nature of our status quo: a rotten-to-the-core, predatory, exploitive oligarchy of dirty secrets and dirty lies protected by an army of self-serving sycophants, servile toadies on the make and well-paid legal mercenaries. Predators aren’t an aberration of the Establishment; they are the perfection of the Establishment, which protects abusive, exploitive predator-oligarchs lest the feudal injustices of life in America be revealed for all to see.”

    “The dirty secret is that the oh-so-hypocritical power elites of Hollywood and Washington D.C. circle the wagons to protect One of Their Own from being unmasked. The first weapons of choice in this defense are (as noted above) threats from thugs, discrediting the exploited via the oligarchy’s paid goons and lackeys in the mainstream media and dirty lies about what a great and good fellow the oligarch predator is. The last line of defense is a hefty bribe to silence any peasant still standing after the oligarchs’ onslaught of threats, smears and lies. Should the worst happen and some sliver of the truth emerge despite the best efforts of the thugs, corporate media, legal mercenaries and PR handlers, then the playbook follows the script of any well-managed Communist dictatorship: the oligarch predator is thrown to the wolves to protect the oligarchs’ systemic predation and exploitation of the peasantry/debt-serfs.”

    “If you want to understand why the status quo is unraveling, start by examining the feudal structure of our society, politics and economy, and the endemic corruption, predation and exploitation of the privileged oligarchs at the top. Then count the armies of self-serving sycophants, toadies, lackeys, hacks, apologists, flunkies, careerists and legal-team mercenaries who toil ceaselessly to protect their oligarch overlords from exposure. Open your eyes, America: there are two systems of “justice”: one for the wealthy and powerful oligarchs, and an overcrowded gulag of serfs forced to plea-bargain in the other. If John Q. Public had done the deeds Mr. Weinstein is alleged to have done, Mr. Public would have long been in prison. As Orwell observed about a totalitarian oligarchy, some are more equal than others.”

  15. GregT on Tue, 10th Oct 2017 11:44 am 

    “This is why I am American critical. BTW, it is also happening everywhere”

    Completely agree. Which is why I don’t believe in nationalism and centralized control. It is far too easy for these types to remain anonymous and hidden from view.

  16. makati1 on Tue, 10th Oct 2017 5:32 pm 

    “21,995,000 to 12,329,000: Government Employees Outnumber Manufacturing Employees 1.8 to 1”

    https://www.cnsnews.com/news/article/terence-p-jeffrey/21955000-12329000-government-employees-outnumber-manufacturing

    That is about 15% of the US population. Pigs feeding at the taxpayer trough. How long can this continue? Not long. Taxes going up. Incomes going down. Who will pay? ‘Weimer’ America.

    “America is in the midst of an ongoing and accelerating shift in demographics and population growth. These trends, long in place, are at a tipping point that are simultaneously driving urban economic growth (plus associated asset bubbles) and rural economic declines (plus associated asset collapses). The spin up and spin down are mutually interconnected, the result of movement in a zero sum game. But for select regions (and rural America in general), there is a surging quantity of sellers and a dwindling quantity and quality of buyers that will result in the primary asset of most Americans, their home, transitioning from an asset to an outright liability.”

    https://seekingalpha.com/article/4111520-tale-2-americas-urban-rise-rural-demise-rationale-hyper-monetize

    Who is going to buy those retiree McMansions when they retire? Answer: No one. They will be worth their true value, which may be less then a dime on the dollar, if anything. Many downgrades coming to America. Many. The Great Leveling continues.

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